PP 7767/09/2010(025354)

30 April 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Resu lts Pr eview

MARKET DATELINE

30 April 2010

CSC Steel Share Price

Fair Value
:
:
RM1.92
RM2.55
1QFY12/10 Results To Beat Expectations Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (CSCSTEL; Code: 5094) Bloomberg: CSCS MK

Net EPS Net
FYE Turnover Profit EPS Growth PER# C.EPS* P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009 971.9 91.2 24.0 55.1 8.0 - 0.9 Cash 11.7 10.4
2010F 1,468.0 107.5 28.3 17.9 6.8 23.5 0.9 Cash 12.8 7.8
2011F 1,596.0 113.0 29.7 5.1 6.5 24.5 0.8 Cash 12.7 7.8
2012F 1,701.0 122.1 32.1 8.1 6.0 - 0.8 Cash 12.8 8.3
Main Board Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

Issued Capital (m shares) 380.0

♦ 1QFY12/10 results to beat expectations. We believe CSC Steel’s Market Cap(RMm) 729.6
1QFY12/10 results (due out on next Friday evening) is likely to beat our as Daily Trading Vol (m shs) 0.6
well as market expectations, driven by higher input prices (in particular, 52wk Price Range (RM) 0.885 – 2.00
iron ore and metallurgical coke) and improved downstream demand that Major Shareholders: (%)
boost demand and prices of flat steel products. China Steel 45.0
LTAT 10.0
♦ But it will be weaker on qoq basis. Despite having anticipated a strong Lembaga Tabung Haji 4.9
set of results in 1Q, we believe it will still come in weaker on a qoq basis,
FYE Dec FY10 FY11 FY12
as 1Q is seasonally weaker on the back of Chinese New Year Holidays and
EPS chg (%) +26.1 +32.1 +46.5
a shorter month in February.
Var to C.EPS (%) +20.4 +21.2 -

♦ Near-term outlook remains positive. Looking forward, we believe CSC PE Band Chart
Steel’s performance is likely to remain strong over the next few quarters,
PER = 11x
underpinned by: PER = 9x
PER = 7x
1. Favourable flat steel products’ near-term price outlook, arising from PER = 5x

the rising flat steel product prices that will sustain inventory
replenishing activities by steel stockists; and

2. Improved demand for downstream products (such as automobiles and

electrical appliances) that will boost demand for flat steel products.

♦ Risks. The risks include: (1) Oversupply in China that results in dumping
Relative Performance To FBM KLCI
activities by Chinese steel producers in the international market; and (2)
Steep contraction in global steel consumption that will weigh down on
international steel prices. CSC Steel

♦ Earnings forecasts. We are raising our FY12/10-12 net profit forecasts

by 26.1%, 32.1% and 46.5% to RM107.5m, RM113.0m, and RM122.1m
respectively, largely to reflect higher sales volumes and selling price FBM KLCI
assumptions.

♦ Investment case. Following the upgrade in our earnings forecasts,

indicative fair value is raised by 26.2% from RM2.02 to RM2.55 based on
9x revised FY12/10 EPS of 28.3 sen, in line with our 1-year target forward
PER of 9x for the flat steel product players. We continue to like CSC Steel
for its: (1) Strong earnings outlook, underpinned by the improving demand
for downstream products that will boost demand and prices of cold rolled
coil (CRC); and (2) Strong balance sheet position, with net cash of Chye Wen Fei
RM303m (or 80sen/share) as of 31 Dec 09. Maintain Outperform. (603) 92802172
chye.wen.fei@rhb.com.my
Please read important disclosures at the end of this report.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 1 of 2
available for download from www.rhbinvest.com
 30 April 2010

Table 2: Earnings Forecasts Table 3: Forecast Assumptions

FYE Dec (RMm) FY09A FY10F FY11F FY12F FYE Dec FY10F FY11F FY12F

Turnover 971.9 1,468.0 1,596.0 1,701.0 Production Volume (tonnes p.a.)

Turnover growth (%) -29.2 51.0 8.7 6.6 CRC 624,000 624,000 624,000
Hot Dip Galvanised Steel 240,000 240,000 240,000
EBITDA 149.1 173.6 177.0 184.6 Pre-painted Galvanised Steel 120,000 120,000 120,000
EBITDA margin (%) 15.3 11.8 11.1 10.9
Utilisation Rate (%)
Depreciation -37.4 -40.3 -37.9 -35.7 CRC 65 70 75
Net interest income 111.7 133.3 139.1 148.9 Hot Dip Galvanised Steel 55 60 60
Pretax profit 116.6 137.8 144.8 156.5 Pre-painted Galvanised Steel 75 80 80

Taxation -25.4 -30.3 -31.9 -34.4

Net profit 91.2 107.5 113.0 122.1
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 2 of 2
available for download from www.rhbinvest.com